A Dispute Between a Petrochemical Company and an EPC Contractor
In large construction projects, particularly in industries like petrochemicals, challenges are inevitable. But one issue that may arises is the extent to which the project owner can interfere with the contractor’s work process. A case currently being handled by LegaTech puts this very question to the test. The dispute involves a leading petrochemical company (the Owner) and an Engineering, Procurement, and Construction (EPC) contractor working on a polymer plant in Assaluyeh, Iran.
The project in question is the construction of a polymer plant in Assaluyeh, a region central to Iran’s petrochemical industry. The Owner had hired an experienced EPC contractor to handle the engineering, procurement, and construction phases. One of the crucial tasks was procuring high-tech machinery and materials from international vendors.
It’s common for owners to have oversight in a project, especially when it comes to approving key decisions like procurement. However, the problem in this case arose when the Owner’s involvement went beyond oversight and turned into active interference. The Owner began influencing the contractor’s decisions, including selecting vendors and approving purchases.
The procurement process, which should have been straightforward and efficient, became bogged down by constant back-and-forth between the contractor and the Owner. The contractor couldn’t move forward with purchasing the critical materials on time because of the delays in receiving approval from the Owner.
The effects of these delays were felt almost immediately. The contractor had already planned the project’s schedule with precision, but with the procurement process stalled, the entire timeline was thrown off. This created a ripple effect, causing delays in other parts of the project as well.
For the contractor, this situation raised an important question: How much can the Owner be involved in the project without causing harm? If the Owner’s actions were a breach of the contract, the contractor might have a legitimate claim for damages.
From a legal standpoint, this case raises the critical issue of where the line should be drawn when it comes to Owner interference. It’s understood in construction law that while Owners have the right to oversee certain aspects of a project, their actions should not cross the line into disrupting or hindering the contractor’s ability to perform the work.
The contractor’s claim here is that the Owner’s level of involvement exceeded what was reasonable, causing delays and unnecessary costs. If the Owner’s actions are determined to be in breach of the contract, it could mean the contractor is entitled to compensation for the damage caused by those delays.